Fed Balance Sheet Concern Outruns Reality, CIBC Says

Fixed‑income markets are overestimating the impact of potential changes to the Federal Reserve’s balance‑sheet policy, which are likely to be slow and limited, according to Canadian Imperial Bank of Commerce.

The Fed isn’t likely to start shrinking its $6.7 trillion balance sheet until next year, said CIBC’s strategists Michael Cloherty, Arjun Ananth and Ian Pollick. Even then, the US central bank would not sell holdings of assets like mortgage-backed securities to avoid spooking the market. It would also rollover roughly a third of its Treasury holdings, they said.